House prices remain sluggish in ‘subdued’ property market
House prices continued their sluggish run in August, gaining just 0.2 per cent on the previous month, as uncertainty caused by the Iran war and the upcoming Budget in October weigh on the market.
The average UK house price grew by 1.6 per cent to £275,465 in the year to August, marking a slight improvement on July’s 1.4 per cent year-on-year growth, according to Nationwide’s house price index.
Britain’s housing market has endured anaemic growth so far this year, as the Iran war has caused interest rates to stay higher for longer, spiking mortgage costs and stifling consumer confidence.
“Market activity and house prices have remained subdued in recent months, in part reflecting the uncertain economic backdrop,” the bank’s chief economist Robert Gardner said.
He added that these geopolitical tensions show little sign of abating. On Monday, Iran said diplomacy with the US “isn’t possible” after Washington launched a fresh round of strikes.
“The conflict in the Middle East [is] exerting upward pressure on energy prices and market interest rates,” Gardner said.
The higher mortgage rates caused by the war have meant that the average homebuyer has had to contribute £18,400 more to a mortgage than in January, according to Zoopla.
Households brace for Budget
But Nationwide’s Gardner said that there are “encouraging signs” that the inflation caused by the Iran war may not be bad enough to force the Bank of England into hiking interest rates.
“Private sector wage growth has eased further in recent months, which should give policymakers breathing space to assess the extent to which tighter policy is necessary to ensure inflation returns sustainably to target,” he said.
Nathan Emerson, chief executive of estate agency trade body Propertymark, said that the UK’s property market is showing “stability and overall consistency” despite high global uncertainty.
He said: “Across the year to date, there have been many challenges to navigate, with average energy prices climbing, inflation still higher than targeted and the base rate remaining higher than many might prefer.
“A key moment for many households will come with the next base rate decision due mid-month, closely followed by what might be included in the forthcoming Autumn Budget at the end of October.”
Property experts have warned the government against repeating the months of speculation around property taxes that preceded last year’s Budget, and which caused an extended slump in house prices and market activity.